theDirt Weekly: December 3, 2022
Rising tides and other tales of doom and woe
Down and Dirty this week
The comforting sound of terrible waves · Anecdata and employment · Manufacturing data seems recessionary · #CornFight · Rail strikes averted on paper · What’s it all mean?
The comforting sound of terrible waves
Day after day the tide comes in and then goes out. It is all so predictable and ho-hum. Up-down. High-low. No big deal. And the tides occur so slowly and so imperceptibly that if you are not paying attention then it can surprise you. So too it goes with business and economics and cycles.
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Then there are the waves within the tide. Rushing in to so much fanfare but then crumbling and dissolving to white foam before receding back into nothing. Only to rush in again in the same dramatic fashion. Over and over. Without ever touching you or getting you wet. So too for most bad economic news.
Seen enough times, one becomes numb to the waves. And the tides. One might almost believe that the waves and tides portend nothing at all and are therefore nothing to worry about. Comforted, you lull to sleep to the soothing sound of rhythmic mundanity. Until a big one sweeps in and drenches you and all of your belongings. Or worse, crushes everything and sweeps you out to sea.
Every now and again, a really bad tide sweeps in quickly. Such can devastate. Such can destroy. Such can sweep in and wipe out everything in its path. Remember the devastation of the Asian tsunamis so many years ago. Remember the angry surge of Katrina. But there are always signs and signals for those wise enough to pay attention and look for them. The question is, are you paying attention? Maybe more importantly, what are you paying attention to?
Anecdata and employment
This week, official headlines told a story of strong labor data. According to the BLS, employment increased by 263,000 in November. Which is funny because this gives the Fed ammo to keep on hiking, baby. Which will continue to strangle the economy.
But the Wise Investor knows that headline numbers tell only a partial story. And there were voices in the aether who decried the headline numbers and made a convincing case.
When one compares employment data to other news (layoffs, declines in manufacturing, etc), one becomes suspicious of the off flavor in the soup. Then there are the stories from people you know that really hit home. Twice this week I heard from or of acquaintances who were laid off or whose companies are planning to make significant cuts to their staff. This is the stuff of fear and panic. This is the stuff of tsunamis and storm surges. The waves are lapping our toes.
In times of transition, when the tides begin to turn, it is difficult to make heads or tales of all the information coming in. Dear reader, this churn confirms my suspicion that the crumbly waves are coming back in and that we are about to get wet. But I must pause and remind myself that things like this almost always take longer than I think (and will probably go over budget). Patient watching is a must. Like a chicken. Or its cousin the Seagull.
Manufacturing data seems… recessionary
To add to the heaping pile of just a little more bad news, the Dallas Fed’s Texas manufacturing survey did not have much good to say. To whit:
Other measures of manufacturing activity indicated contraction this month. The new orders index plummeted to -20.9―its sixth month in a row in negative territory and lowest reading since May 2020…
Perceptions of broader business conditions continued to worsen in November. The general business activity index posted a seventh consecutive negative reading but moved up five points to -14.4. The company outlook index pushed down further, from -9.1 to -15.2… The outlook uncertainty index retreated 18 points to 20.4, still slightly elevated relative to its average reading of 16.6.
Like the NAHB home builder survey, I tend to trust this data a bit more than sterile and superficial employment numbers lacking nuance and context. That’s because this information tells a story of decision-makers who have skin in the game. And the story is doubt and uncertainty. That feeling is spreading like a virus, and it is damned hard to stop. Even the uninfected will be affected. Lockdowns and panic. We all remember how that goes, right?
In one of those stories that is surely to be ignored by the 98% of people in this nation who do not farm (even though almost all of us are affected by it in very direct and real ways), there is a trade dispute about corn between Mexico and the US. According to this story from MorningAgClips.com, Mexico is planning to ban the import of all genetically modified corn. Mexican President Obrador as quoted in the linked story:
What is being proposed is that we also set a date for studying the contents of yellow corn to see whether it is damaging to human health, even if it is used for animal feed,” López Obrador said. “Because that takes time, we are offering a space of two years (for imports) in the case of yellow feed corn.
My first sense is that this is blustering and grandstanding by Mexico to secure concessions and get a better deal. After all, Mexico sources 40% of its livestock feed corn from the States and filling an input gap that large from other sources in a couple of years seems… improbable. So this story might be a nothing-burger. After all, when it comes to trade and agriculture one ought not mess with Big Corn. US politicians across the spectrum are desperate to please Iowa primary straw pollers and will go to the mattresses to secure corn’s market.
But as with all dangerous coal mines, one grows concerned every time the canary twitches. There are, after all, quite a few astute international leaders out there who see our nation as being on the ropes and ripe for punching. A successful attack on the corn market in the US, especially if it goes on for years, might be devastating for farmers. And for land. Taken to its extreme, it would absolutely rock agriculture. Is this all a long shot? Probably. Do we wring our hands needlessly? Maybe. But is it possible? Absolutely. Therefore anyone with interest in agriculture, food, and land cannot ignore it. The world is shifting. Relationships are changing. The tide is coming in.
Rail strikes averted on paper, but the tide cometh anyway
Dear reader, I am not a prophet. I am more of a Punxsutawney ground hog in the midst of winter and constantly worried over shadows. And with this story, I see a very big shadow. The down and Dirty is that all of the railroad strikes that I’ve been writing about over the past few months came to a head this week. Railroad companies and labor unions had until December 9th to come to an agreement on a contract. They were not going to make it. The sticky issue is sick days (of which railroad employees receive none). The impasse caused the issue to suddenly became a cyst of cataclysmic proportions. The pimple was so nasty that Congress decided to, you know, cover it with make-up and then pat themselves on the back. Which is to say that they voted to cram a labor contract down the throats of the railroad workers.
Think of that for a second: a supposedly pro-labor, Democrat-run congress and president voted and then signed into LAW legislation to force unionized labor to accept a contract that they (the labor unions) were planning to vote NOT to accept. That should tell you how big of a deal it is for our entire economy, for every last person in this nation, that railroads continue to function. Biden Pelosi Schumer LLP completely threw railroad labor under the bus to save the economy. And they absolutely had to do it. For an excellent summation of the problem regarding Precision Scheduled Railroading and sick leave, please read this article (anyone who doesn’t read it is a cotton-headed ninny muggins).
Dear reader, I have very deep feelings about this problem. But I will leave those for another time and essay. For now, I will merely comment that I do not think this issue is resolved. Not even by a long shot. A can has been kicked. I feel very strongly that this is a festering sore that will weep before possibly exploding and infecting the entire economy. The underlying and deep-rooted problem was merely papered over by quick legislation. The underlying problem was not solved. I suspect we will all be revisiting this issue in short order.
What does it mean for real estate?
A rising tide lifts all boats. Unless said tide rises so fast and so far that it smashes everything in its path and wreaks death and destruction. Like a tsunami or the storm surge from a hurricane. Those are the metaphors that spring to mind after looking at charts of land prices from across the state of Texas for the past twelve years. Folks, from March 2020 to today, average prices per acre rose 97% across Texas. The rising tide is unprecedented and especially at the scale that occurred.
I wonder if the latest price peak has a corollary in the oil bubbles such as those experienced by Dimmit County during the shale revolution in the early 2010’s. The lesson from that hurricane is simple: no storm surge is permanent. Hurricanes pass and the water rushes back to the sea. Often it carries with it much of what it smashed. The rest is left in a devastated rubble on the shore. Interestingly, Dimmit County land prices did not recover their highs or enjoy any of the price bump of the last two years. Nor did many counties in Texas. But all of that will come out in a future post.
This week’s lingering impression
While much of my writing is cased in a hard candy shell of doom and gloom, I’ll end this week by noting (reiterating) that I see incredible opportunity ahead. For the wise investor, comeuppance is a time to be greedy when others are fearful. And comeuppance is coming. But we are not quite there yet. The piper has not been fully paid. He is, however, softly knocking on our door.
Oh yeah, rates were down week over week, but when the return on a 1-year note beats a 10-year note then we are still living in Crazy Town. So in conclusion I remind you that the curve must revert!
Texas Land This Week
The following information comes from LandWatch.com. (Please read the data disclaimer footnoted below).
As of December 3, 2022 there were…
14,103 acreage properties listed as Available
949 acreage properties Under Contract
2 properties up for auction
Five counties with the most listings:
Grayson County - Texoma Region (277 listings)
Edwards County - Edwards Plateau West Region (275 listings)
Henderson County - Piney Woods North Region (231 listings)
Gillespie County - Highland Lakes Region (227 listings)
Hunt County - Dallas Prairie Region (212 listings)
For the last 7 days there were…
431 properties listed or changed
6 properties marked as under contract
1 property identified as Sold
Five counties with the most listing activity in the last 7 days:
Edwards County - Edwards Plateau West Region (22 listings)
Val Verde County - Edwards Plateau West Region (14 listings)
Kaufman County - Dallas Prairie Region (13 listings)
Gillespie County - Highland Lakes Region (10 listings)
Brown County - Cross Timbers Region (9 listings)
Where I get my information:
An analyst’s analysis is only as good as the information they possess. As the old programming saying goes: garbage in-garbage out. The following is a list of my sources…
I follow a bunch of smart people on Twitter. A sample is represented above. I hope that you will also follow me on Twitter:
MarketWatch App (market quotes and data)
North Texas Real Estate Information System and Heartland Realtors
The information contained herein is based on properties that are greater than 25 acres and which I refer to as ‘acreage properties’. This information is single source. Which means that this is NOT an exhaustive list of all properties available and sold everywhere in the Great State of Texas. Texas is a non-disclosure state and is therefore a Dark Market. This means that there are a great deal of data that are hidden, dispersed, not allowed to be shared publicly, or just plain unavailable. The following information is for reference and entertainment purposes only.